Even though many infrastructure players are still struggling with stressed balance sheets there has been an improvement in financial profile of firms having exposure to airport and highways projects indicating a revival in the sector, says ICRA.

“Early signs of a revival of the infrastructure sector are evident with the improvement in the financial profile of players,” the rating agency said in a statement today.

ICRA noted that though many infrastructure players are still struggling with their highly leveraged balance sheets, infrastructure companies with exposure to the airport and the highway sectors have started witnessing an improvement in their operational and financial performance.

According to the agency, the aggregate debt of infrastructure companies across segments at a standalone level as of March 2017 had increased only marginally from March 2016.

At the consolidated level, there was a 12 per cent y-o-y decline in debt from Rs 1.58 lakh crore to Rs 1.39 lakh crore, primarily due to divestment of stake in subsidiaries or projects.

“While it is still early to comment on whether the tough phase for infrastructure companies is over, things have certainly started improving. We have seen deleveraging, and focus on execution as the drivers of this improvement,” ICRA Vice-President and Sector-Head, Corporate Ratings Shubham Jain said.

He said infrastructure segments like airports and highways have been outperforming with improved operational performance supported by healthy traffic growth in both the segments.

A major push from the government on roads and urban infrastructure segments has helped construction companies improve their order book position, Jain said.

ICRA said there has been an improvement in order inflows over the last couple of years with a major push coming from segments like roads, metro and urban infrastructure.

Currently, the order book position of most construction companies stands at over three times their last reported annual revenues, it said.

ICRA further noted that there have been funding issues, which will continue to be a challenge.

“With the banks grappling with high NPAs, the banking credit to infrastructure and construction sectors has been on a gradual decline. However, a part of this is also due to the increased share of NBFCs, and the corporate bond market,” ICRA said.

Jain also said that alternate funding avenues like Infrastructure Debt Funds (IDF), Infrastructure Investment Trusts (InvITs) have not picked up after initial issuances.

“The weak market response to the listed InvITs and pending clarity on tax liability arising at the time of transfer of assets to the InvIT has made other prospective InvIT issuers put their plans on hold. As InvITs are more of a fixed-income type instrument, investor interest is expected to come primarily from the institutional investors,” he added.